Earnings Take Center Stage after Deal is consummated

Stocks in the US started the session on the defensive as market participants bought the rumor of a deal and sold the fact. On Thursday, the Senate pushed through a bill that would allow the government to reopen and averted a default by the US treasury by raising the debt ceiling. Earnings continued to flow with Goldman Sachs (NYSE:GS) beating on the bottom line and IBM (NYSE:IBM) missing on the top line. Mid-day the markets turned positive with the S&P 500 index notching up a new all-time high and closing up nearly 12 points at 1733.

Late on Wednesday evening the Senate passed a bill that would reopen the US government until December and raise the debt ceiling until February of 2014. Both sides now agree that negotiations on reducing the debt are in the cards. Democrats have already discussed the need for additional revenues while Republicans have moved directly to entitlement reform.

On Wednesday evening big blue released earnings that were worse than expected. IBM shares tumble following a large revenue miss. IBM’s shares tumbled on the open after the tech giant reported that Q3 revenues fell for the sixth quarter in a row, slipping 4% on year to $23.7 billion and missing consensus by over $1 billion. Sales were hurt by a 22% slide in China, where hardware revenue plunged 40%, with a rebound in demand not expected until after Q1 2014. Earnings per share of $3.99 beat consensus forecasts, while net profit rose 6% to $4.04 billion.

Goldman missed on the top line showing that revenue slipped during the third quarter. Investment banking revenue of $1.17 billion is nearly unchanged from a year ago, with mergers and acquisitions revenue down and underwriting in the black. The investment banking giant reported Q3 earnings per share of $2.88 which beat by $0.45. Revenue of $6.72 billion missed estimates by $0.64 billion.

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